Real estate and jobs — there's a link

Thursday

Oct 4, 2012 at 3:15 AM

There are two sets of statistics on our front page, this week — those detailing the August unemployment numbers and those revealing the real estate activity in Strafford County for the year up to date and the six preceding years.

Let us look at the jobless rates first, while reminding everyone at the outset that these are U-3 numbers that omit whole groups of potential workers, who, when they appear in the U-6 numbers, more than double the "labor underutilization" rate.

A practiced eye, looking at the summer numbers, will notice Durham's U-3 unemployment rate is uncharacteristically high at 6.2 percent, which suggests that there were many fewer summer jobs for students in and around UNH this year. It is also a time of year when construction crews would, in normal times, be going gangbusters with building projects, but with the housing market (which we are coming to) in a state of very slow recovery, there are few new homes being started, and this may very well account for one or two percentage points on the jobless rate for places like Milton, Farmington and New Durham. Even in towns like Alton and Wolfeboro, where, in the height of the tourist season, unemployment can be expected to fall to two or three percent, there was just the hint of an economic chill on the summer breeze. The worrying thing, too, is that while New Hampshire has actually lost jobs over the past year, neighboring states like Vermont and Massachusetts have added them. We doubt if the arrival of the Safran plant in Rochester can work a miracle all by itself, but it will help in these parts.

We think there are twin keys to economic improvement in the greater Rochester area, with one being more manufacturing jobs, and the other being a healthy and stable real estate market, and in this latter regard, the light at the end of the tunnel has drawn a little closer with this quarter's numbers.

The number of deeds and mortgages recorded at the Strafford County Registry continues to rise, and while, in the case of mortgages, activity is less than half of what it was in 2006, that is no big concern. In 2006, and its immediately preceding years, anyone with a pulse was being given a mortgage to buy a home at an inflated price and that process certainly contained the seeds of its own destruction — destruction not just for the mortgagee but damage to taxpayers and the community in general. Only the banks deemed too big to fail seemed to make out OK.

Now, two things are going on in the housing market. Home prices have dropped far enough to bring property investors into the market more strongly, as evidenced with the deeds activity, and this helps prices stabilize and then climb. When prices head back up, this is a boon for some homeowners. Someone who had a $200,000 mortgage at 6 percent interest could not refinance when their home was worth only $190,000, but when the value climbs to $210,000, the sun comes out. They suddenly have equity, and can refinance at 4 percent, saving around $4,000 every year in interest payments.

As the ability to refinance becomes more common, greater numbers of residents experience a sense of financial relief, and are able to relax their purse strings a little. This helps other sectors of the economy, like retail outlets, restaurants and entertainment amenities, which, in turn, add a few workers.

The other thing that is going on, though — property foreclosures — is still having a negative impact, and nowhere in the seacoast area is suffering more than Rochester. In the first nine months of this year, there were 97 foreclosures, which is the highest Q3 number for the city in this real estate crisis so far. From 2007, when the early signs of trouble began to show, there have been over 700 foreclosures in Rochester alone. That is an astonishing and devastating number, and it is only part of the measure of worry and stress afflicting portions of the community, for there are many more families still hanging on by a fingernail. Let's hope that slowly rising home prices will come to their rescue in time, and that New Hampshire will soon start adding jobs again.